Lease Extension

Posted on 4 July 2018 by vicky

I own a garden flat in London that I bought for £158,500 in November 2009. The lease now stands at 74 years and my mortgage is fixed till December 2013. The Leaseholder as indicated they would extend the lease to 99 yeasr (not by) for £10,000 + costs. Having spoken to an estate agent they have indicated we would be able to sell the property with the existing lease but would take a loss. As I do not know if we will be moving anytim soon I wondered whether it makes sense to pay for the increase and my mortgage company have indicated they would increase the mortgage to give me this money which would increase my mortgage by £50 a month over 22 years. We will probably move out of the flat in around 2-3 years time so do I; a) extend the lease by paying a lump sum of savings outright b) extend the lease by remortgage increasing my monthly payments but keeping the lump sum savings c) Not increase the lease and risk selling in 2-3 years time. Thank you

Hi Vicky,

The answer to this really depends on how much the extension to your lease would add to the value of your home. If it is any less than £10,000 + costs + interest would it be worth it?  I recommend that you get 3 independent valuations from local estate agents to give you a good idea of the value and then decide if you want to proceed.

Presuming that it does make sense to extend the lease, the question them becomes one of how do you pay for it?  This is really going to depend on whether the interest rate you can get on your savings is greater than the interest you would pay by extending your mortgage?  If it is then it makes sense to borrow the money, if not then you should consider using your savings.  If you did use your savings would you have any savings left for emergencies and unexpected outlays like your car breaking down?

There is a lot to take into account and I think you should also consider getting independent legal advice before making a decision.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

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